What Are Krugerrands?
Let me explain Krugerrands directly: these are gold coins minted by the Republic of South Africa starting in 1967. They were created to promote South African gold on the international stage and to let individuals own gold easily. You'll find that Krugerrands are among the most traded gold coins in the global market today.
These coins hold legal tender status in South Africa, but they were never given a specific rand value. Instead, their worth comes solely from the current price of gold. So, if gold prices fluctuate, the value of your Krugerrand does too.
Key Takeaways on Krugerrands
Here's what you need to know at a glance: Krugerrands originated in South Africa in 1967. At their height in 1980, they made up 90% of the world's gold-coin market during the gold market peak. Even with South Africa's declining gold production, they stay popular with gold investors.
Understanding the Krugerrand Coin
On the front of a Krugerrand, you'll see the image of Paul Kruger, who served as president of the South African Republic from 1883 to 1900. The name 'Krugerrand' combines his surname with 'rand,' the South African currency. The back shows a springbok antelope in mid-gallop, a key national symbol.
Kruger was in office during major gold events, like the founding of the profitable Durban Deep mine in 1896 and the Witwatersrand Gold Rush, which led to Johannesburg's establishment. You can trade Krugerrands on the Johannesburg Stock Exchange through a regulated secondary market, with prices based on the coin's weight. The South African Reserve Bank issues new ones, and you can redeem them there.
Given their legal tender role, Krugerrands are minted to withstand wear better than pure 24-karat gold coins. They're 22 karat, meaning 91.67% gold mixed with 8.33% copper alloy for durability.
History of Krugerrands
When Krugerrands launched in 1967, U.S. citizens couldn't own gold bullion, but foreign coins were allowed, so Americans could buy and sell them. As awareness of South Africa's apartheid system grew, interest in Krugerrands dropped.
In the 1970s and 1980s, many Western countries, including the U.S. in 1985, banned Krugerrand imports as sanctions against apartheid. These ended in 1994 when apartheid was dismantled, but some U.S. investors didn't realize the ban was lifted, leading to low import volumes.
Back in 1970, South Africa produced over 75% of the world's gold reserves, making Krugerrands the top choice for investors in the 1970s. By 1980, they held 90% of the global gold-coin market at the gold peak.
Current Status of Krugerrands
After apartheid ended in 1994, Krugerrand production dropped sharply. South Africa's gold output recovered somewhat but never matched the 1970s and 1980s levels. By 2016, production was down 85% from 1980, with the country supplying just 6% of global gold.
Krugerrands still face challenges today. South Africa's gold production fell over 30% between December 2018 and 2019, marking the longest contraction since the 2007-2008 financial crisis.
Investing in Krugerrands
Krugerrands are still a go-to for gold investors because of their value and compact size, which makes storage straightforward. If you're a professional or private investor, you might use them to invest directly in gold bullion, hedge against the U.S. dollar, or diversify your portfolio.
Gold's proven value retention draws investors, especially as a safe haven during economic downturns. Some prefer the tangibility of physical coins over paper securities.
If you're considering buying Krugerrands, ensure you have a secure storage spot. Watch out for scams, deal with reputable sellers, and check your state's tax laws, which might include sales tax on gold.
Features of Investing in Gold via Krugerrands
- The gold market is highly liquid.
- Your investment is in physical gold, independent of any mine's performance.
- Gold has a strong track record of increasing in value as a non-renewable resource.
- It shows low-to-negative correlation with other assets, aiding diversification.
Where Can I Buy a Krugerrand?
You can purchase Krugerrands from coin dealers either in person or online. All Krugerrands, including those from the sanctions era, are now fully legal to own, buy, or sell.
How Much Gold Does a Krugerrand Contain?
Each Krugerrand has one ounce of pure gold, with a total weight of 1.09 ounces due to the copper alloy for added durability.
How Much Does One Krugerrand Cost?
Since it contains one ounce of gold, the cost of a Krugerrand tracks the current per-ounce market price of gold closely.
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